Asian industry sources have suggested that second-grade touch panels that don't pass Apple's quality standards for the iPad 2 are making their way into Chinese "white-box" iPad clones, according to a new report.

9.7-inch IPS panels that fail to meet Apple's stringent requirements for use in the iPad 2 are being sold to China-based vendors, Taiwan-based supplier sources have told DigiTimes (via MacNN).

Sources pointed out that LG Display and Samsung Electronics, two main suppliers of the panels, shipped an estimated 12-15 million 9.7-inch IPS panels in the second quarter, while 7-9 million iPad 2s are projected to ship in the same period.

The extra panels are reportedly grouped into three portions: those unable to meet requirements, those sent to Apple manufacturer Foxconn for increased shipments in the third quarter, and those sold to white-box vendors in China.

As an example of a generic iPad clone, the report cited the T10 Android 2.2 tablet from Chinese vendor SmartDevices, as well as devices from vendors AGSO and Wanlida. The T10 sells for CNY1,900 ($293), nearly half the price of the base iPad 2 model, which sells for CNY3,688 ($570) in China.

SmartDevices' T10 Android tablet

Various sources have suggested that Apple controls as much as 60 percent of the world's available touch panel capacity. It is also said that Apple leverages upfront cash payments in order to obtain critical components that are in short supply.

A recent report from DigiTimes claimed online retailer Amazon could face difficulty securing display orders for its rumored LCD tablet. Amazon is expected to release the device this fall, but Asian suppliers are reportedly "reluctant" to make commitments, in part because Apple has booked up much of the available production capacity.

The iPad has seen significant demand in China, though Apple has a long way to go in tapping the full potential of the tablet market in the world's most populous country. Apple's launch of the iPad 2 drew substantial lines, which included scalpers hoping to capitalize on the limited supply of the device.

China's four Apple stores are currently the company's highest trafficked and highest grossing locations. The company is set to open a fifth store in the country later this year.

This sounds like a legitimate claim, except that the Apple contracts most likely require that all defective, rejected items will be destroyed. Sure, there are few that would make it out, but not enough to make a "white box" product that would support high sales.

This sounds like a legitimate claim, except that the Apple contracts most likely require that all defective, rejected items will be destroyed. Sure, there are few that would make it out, but not enough to make a "white box" product that would support high sales.

You're forgetting China is the new Wild West. Apple can do its best but we've seen prototype leaks, component leaks, and all kinds of shenanigans from various parties dealing with Apple and non-Apple related products. In the developing world it's not like the developed world. Those who get caught are only a fraction of those that get away. One can never really know what is going on in China.

With regard to the rejected IPS panels most likely the batches that were meant to be destroyed or disassembled got "misdirected" to these "white box" tablet makers. It could be a few hundred, a few thousand, a few hundred thousand or more. Enough for the tablet makers to try and sell and profit - no further original work is needed, you just slap together the components and throw in Android.

Perhaps, somebody failed to follow order. Just sent them up to North Korea for hard labour and all singing and dancing hail-to-the-chief assembly.

That tablet (and surely many other KIRFs) looks like a real iPad. Samsung is the chief copycat of course but to differentiate iPad even further, Apple need to make it lighter, thinner, longer real world battery life and make it known that iOS rules in term of the quality of Apps in the AppStore, features and usages. Most importantly, need to use indipustable custom component or two.

You're forgetting China is the new Wild West. Apple can do its best but we've seen prototype leaks, component leaks, and all kinds of shenanigans from various parties dealing with Apple and non-Apple related products. In the developing world it's not like the developed world. Those who get caught are only a fraction of those that get away. One can never really know what is going on in China.

With regard to the rejected IPS panels most likely the batches that were meant to be destroyed or disassembled got "misdirected" to these "white box" tablet makers. It could be a few hundred, a few thousand, a few hundred thousand or more. Enough for the tablet makers to try and sell and profit - no further original work is needed, you just slap together the components and throw in Android.

You are right, I do forget that China has a good bulk of the world population and manufacturing facilities.

Yippee! I just picked up an Android tablet that contains Apple iPad-rejected components and saved a bundle. It might not be good enough for Apple customers but it's definitely good enough for me.

I suppose it's a good way to do business and at least all those unused parts don't just end up as landfill. I'm sure there are a lot of people in the world that would be satisfied with second and third tier products. You buy what you can afford and I see no reason why those people can't be served to some measure. One thing for certain, that's a lot of rejected displays. I always suspected that from the beginning that yields are far from 100% but I guess rejects could be as high as 20%. Building a high-quality tablet is not going to be for the companies with shallow pockets. A company that doesn't have the retail clout of Apple is going to lose a lot of money on tablets they can't sell. Apple is sitting high on the food chain and the competitors are fighting for scraps. Very lucrative for Apple but very costly for competitors.

In the end, Apple's economies of scale are going to be unbeatable. Competitors will have to keep cutting corners to keep costs down and their products won't even be close to an iPad's or iPhone's construction.

This sounds like a legitimate claim, except that the Apple contracts most likely require that all defective, rejected items will be destroyed. Sure, there are few that would make it out, but not enough to make a "white box" product that would support high sales.

All those that shipped to Apple likely would be destroyed per apple request. However, if a batch was held from shipping to Apple because of LG or Samsung in house discovered defect, these two could very likely ship it to a Chinese firm because they didn't have the clout to request such stringent quality, and/or didn't really have a choice if they want any panel at all.

It makes perfect business sense to sell flawed and rejected displays to Android users because the majority of them wouldn't know the difference anyway. I remember that quite a few of these people actually claimed with a straight face that the Xoom display was superior to the IPS display found on iPads. But then again, we are talking about the same kind of people who think that 16:9 is the right aspect ratio for tablets.

It's pretty clear to see that many Android users suffer from vision problems and they should make an appointment with an optometrist as soon as possible. Their eyes probably operate at 10 frames per second, because many of them don't claim to see any difference between the ultra smooth graphics and lightening fast response of an iPad compared to whichever mediocre "iPad killer" they are touting on any particular day.

Binning or tiering or grading happens across so many things - food, metallurgy, silicon chips, gases and fluids, cellulose fibre, chemicals, motors, and so on. Just open a page in any standards body, authority, or association to see the process at work. Unless all concerned parties make specific agreements, I see no problem with selling a product rejected by one party to another interested buyer. Naturally this presumes that all buyers are aware of what they are buying, and the sellers are forthcoming with what they are selling -- flat panels, included. Accepted and measurable standards are vital, be it from public policy or from the private and public sector.

It's when a party misrepresents a standard that it can cause harm (and worse), be it direct or indirect. I'm grateful for a spectrum of standards. It helps derive efficiencies amongst scarce resources.

So, if the story is to fuel tribal glee, well, okay.

If the story is to highlight how Apple's rejected components help other manufacturers produce lower cost products for people who otherwise can't afford an iPad but now gain access to touch computing and its benefits, well, that's a nice reminder.

If the story aims to speculate on, say, whether an Amazon 9.7" IPS tablet is even possible given the apparent supply constraint on that specific glass size and panel-type; and, perhaps the forecasted tablet will use a different crystal switching tech and/or glass size, well, I'm hungry for more details and look forward to what AI's crack investigative team will unearth for my next guilty reading pleasure. : )

It is also said that Apple leverages upfront cash payments in order to obtain critical components that are in short supply.

A recent report from DigiTimes claimed online retailer Amazon could face difficulty securing display orders for its rumored LCD tablet. Amazon is expected to release the device this fall, but Asian suppliers are reportedly "reluctant" to make commitments, in part because Apple has booked up much of the available production capacity.

All Asian manufacturers require the cash upfront. No cash, no goods. It's been like this for a long time, whether it be t-shirts or components. Of course, Apple has a big pile of cash so they can pay for more parts in advance.

Now in the news: Chinese knockoffs use substandard, inferior components in their cheap, substandard, inferior products.

With the high level of poor quality, counterfeit products coming out of Asia, and the complete lack of respect for intellectual property laws upon which many Western economies now rely, it's surprising that Western companies take the risk of manufacturing in Asia at all.

By going after Samsung so visibly Apple has sent a message to Chinese white box makers to keep their crap out of the US market. If they actually do take Samsung to the wire then they'll have a solid precedent and likely be able to get very fast relief from the ITC from any subsequent infringers - even if they settle the patents involved are still considered strengthened.

With the high level of poor quality, counterfeit products coming out of Asia, and the complete lack of respect for intellectual property laws upon which many Western economies now rely, it's surprising that Western companies take the risk of manufacturing in Asia at all.

It all boils down to greed. These companies want the biggest margins and the asian countries can produce the parts for pennies.

The unions and governments in the west want better wages and more taxes and their greed forces companies to go abroad for parts and product manufacture.

Ultimately companies can ignore counterfeits due to their lack of distribution in the west which is where their main markets are.

This sounds like a legitimate claim, except that the Apple contracts most likely require that all defective, rejected items will be destroyed. Sure, there are few that would make it out, but not enough to make a "white box" product that would support high sales.

What the contract says and what happens is rarely the same in China. Sucks but true.

Also, if over a certain cut of a batch fails they might be destroying the whole batch so that could be a lot of panels going out

It all boils down to greed. These companies want the biggest margins and the asian countries can produce the parts for pennies.

The unions and governments in the west want better wages and more taxes and their greed forces companies to go abroad for parts and product manufacture.

Ultimately companies can ignore counterfeits due to their lack of distribution in the west which is where their main markets are.

You left out the " most greedy group" in the equation ..... us, the consumer, who constantly and consistently keep whining for lower and lower prices .... all the while turning a blind eye to whatever it takes to get those same low prices. .....

Apple, bigger than Google, √ ..... bigger than Microsoft, √ The universe is unfolding as it should. Thanks, Apple.

You left out the " most greedy group" in the equation ..... us, the consumer, who constantly and consistently keep whining for lower and lower prices .... all the while turning a blind eye to whatever it takes to get those same low prices. .....

Well said sir. Like most people, I don't like overpaying for a product that I can get elsewhere at a lower price. That's just being prudent.

At the same time, I understand in getting the most value for my hard-earned money, even if that means paying more for product A when I could get product B for less.

It's a fine line and perhaps I'll get flamed for it. In the context of this subject, I think the end-consumer is as much to blame for basing their purchases based on price alone and not factor in things like usability, quality, durability, service, etc..

It's a fine line and perhaps I'll get flamed for it. In the context of this subject, I think the end-consumer is as much to blame for basing their purchases based on price alone and not factor in things like usability, quality, durability, service, etc..

I think that kind of mentality has really screwed up a lot of things.

A documentary called Schmatta: Rags to Riches to Rags detailed what consumer thinking like that did to the New York garment industry.

Like you, I don't mind paying extra for quality, but I don't want to pay $150 for X, when I can get the exact same as X for $100.

I prefer to look at the long term cost of an item. My 2007 iMac is still going strong, while my Gateway laptop purchased a few months earlier became annoying to work with years ago.

My HPs and Dells continue to work great - because I threw Windows away and installed Ubuntu.

The software. When I used Windows I'd reinstall everything every year to keep performance up. I never did that on this one and it slowed down over the years. Once my children started using our Macs, they don't want to use this, they noticed a difference in performance. :-) The only time this would be used vs a Mac is instead of the G4 Mac Mini. It's brutally slow running Flash sites.

Yeah I bought one. Back in 2006 I was still a hardcore windows user, although I bought a Mac Mini to see how sites I'd created looked for Mac users.

If I were to buy another Windows laptop, I think it would be an AlienWare laptop like my nephew has. Although I can't see any reason to do that, unless Parallels or VM-Ware stopped working.
If only Intuit would produce a decent Mac version of QuickTax, instead of their "In order to provide better service to Intuit Canada's Macintosh customers, we are recommending that former QuickTax Macintosh customers use QuickTax online to file their income taxes."

Yeah I bought one. Back in 2006 I was still a hardcore windows user, although I bought a Mac Mini to see how sites I'd created looked for Mac users.
If only Intuit would produce a decent Mac version of QuickTax, instead of their "In order to provide better service to Intuit Canada's Macintosh customers, we are recommending that former QuickTax Macintosh customers use QuickTax online to file their income taxes."
Quicktax is the only Windows program I use now.

I suggest for Canadian income tax on Mac or Win you try TaxFreeWay.
It has worked lie a charm for me, much better than Quicktax.